first question: gov expenditure has a larger impact than taxes. So the gov expenditure will overshadowo the increase in taxes/fall in AD
not sure about the second one
@bobchillax
First one: the spending multiplier is higher than the tax multiplier, so direct spending by the government is more effective in increasing AD than any change in taxes (increase or decrease)
Second: Using the loanable funds graph, a decrease in deficit spending is illustrated by a decrease in demand for loanable funds, which decreases the interest rate.
hi guys! i’m self-studying for micro (don’t have time for macro lol) and i’m SUPER nervous. i keep averaging 15 questions wrong for the MC and the curve is brutal x.x
@bobchillax budget deficit is an expansionary fiscal policy which is accompanied by an increase in aggregate demand and thusly interest rates and prices. Reducing budget deficit will do the exact opposite so C
@Deuce781 Suppose that there are two subparts to a question, and you’ve got to use the first part’s answer to do the second part. Consistent error grading (or carry over error) comes into play when you get the second part’s answer wrong only because you got the first part’s answer wrong, but your technique for solving the second part is correct. If there is consistent error grading, then they will give you the point for the second part since you clearly know how to solve the problem, but you only got it wrong because you based the answer on the first part’s answer, which was wrong.
Does anyone know if there is consistent error grading (or carry over error grading in econ??) I know there is for ap chem.
Yes, there are “continuity points” for questions based on a previous wrong answer. For instance, if you mistakenly said that buying bonds decreases the money supply for part A of an FRQ, you can still earn points on later questions asking what will happen to interest rates, investment, AD, or economic growth as long as you’re consistent with your previous wrong answer (in this case you could say interest rates increase, investment decreases, AD decreases, economic growth slows even though the answer key says the exact opposite).
Why do incomes increase when aggregate supply increase? I know that the price level falls but I’m unsure about the relationship between price level and income
@jamanda I would know the basics for the multiple choice section. I highly doubt there will be anything regarding that on the FRQs.
Keynesian: Concept of Sticky Wages and the believe that government should regulate the economy
Classical: Concept of self-correction of the economy and that government should not interfere.
Monetarist: Money supply directly affects AD and MV=PQ
@DyrannosaurusRex When the aggregate supply increases or shifts to the right, the price level decreases. This decrease in price level causes disposable income to increase. Think of it like this, if the monthly cost of your food decreases $100, you now have $100 to spend on something else.
@DyrannosaurusRex When talking about the AD-AS graph, income usually is a synonym for output/real GDP. And even if they weren’t, an increase in AS is correlated with an increase in wages and salaries which count as income.
what do I do?